Citi estimates South Korea's National Pension Service could implement up to $60 billion in additional foreign exchange hedging as it raises its FX hedging ratio to 15%, though the expansion is expected to proceed gradually due to instrument limitations and potential impacts on investment performance.
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Citi - National Pension Service Has Up to $60 Billion in Additional FX Hedging Capacity, Gradual Expansion Expected
Citi estimates South Korea's National Pension Service could implement up to $60 billion in additional foreign exchange hedging as it raises its FX hedging ratio to 15%, though the expansion is expected to proceed gradually due to instrument limitations and potential impacts on investment performance.
The Taiwan dollar’s continued weakness is raising concerns about spillover effects on the Korean won, as both currencies face pressure from outbound investment, regulatory changes, and shifting hedging strategies by major institutional investors.
#YonhapInfomax #TaiwanDollar #KoreanWon #FXHedging #LifeInsurers #USDExchangeRate #Economics #FinancialMarkets #Banking #Securities #Bonds #StockMarket https://en.infomaxai.com/news/articleView.html?idxno=105600The National Pension Service sharply increased its FX hedging by $2.8 billion in October–November 2023 as the won weakened, while continuing robust overseas investments, highlighting efforts to manage currency risk amid strong capital outflows and a surging dollar-won rate.
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National Pension Service Ramped Up FX Hedging as Won Weakened Last Year—$2.8 Billion Increase in October–November
The National Pension Service sharply increased its FX hedging by $2.8 billion in October–November 2023 as the won weakened, while continuing robust overseas investments, highlighting efforts to manage currency risk amid strong capital outflows and a surging dollar-won rate.
Hanwha Ocean Co. maintains its FX hedging policy despite government calls for expansion, citing financial stability and U.S. investment plans, while suspending dividends for 2024 to prioritize capital expenditures and overseas projects.
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Hanwha Ocean Says Government FX Hedging Policy Has No Impact—Focus Remains on Financial Stability
Hanwha Ocean Co. maintains its FX hedging policy despite government calls for expansion, citing financial stability and U.S. investment plans, while suspending dividends for 2024 to prioritize capital expenditures and overseas projects.
The National Pension Service is considering raising its foreign exchange hedging and domestic equity investment ratios, aiming to boost fund manager compensation to the top 10% level and enhance returns, while advancing risk management and expanding active investment strategies in global markets.
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Lee Chang-yong Says 'Reducing National Pension's FX Hedging and Overseas Investments Eases Supply-Demand Pressures'
Bank of Korea Governor Lee Chang-yong signals that scaling back FX hedging and overseas investments by the National Pension Service could help stabilize market supply-demand dynamics.
The dollar-won exchange rate remains elevated despite South Korea’s strong economic fundamentals, as persistent real demand for dollars from investors and corporates offsets government stabilization efforts, even as the KOSPI hits record highs and GDP growth forecasts improve.
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Why the Dollar-Won Exchange Rate Remains Elevated Despite Improved Won Fundamentals
The dollar-won exchange rate remains elevated despite South Korea’s strong economic fundamentals, as persistent real demand for dollars from investors and corporates offsets government stabilization efforts, even as the KOSPI hits record highs and GDP growth forecasts improve.
Citi projects the National Pension Service will sustain its FX hedging through H1 2025, absorbing $5 billion in monthly dollar demand and impacting South Korea’s currency and capital flows.
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Citi Expects National Pension Fund’s FX Hedging to Continue Through H1 Next Year, Absorbing $5 Billion Monthly Dollar Demand
Citi projects the National Pension Service will sustain its FX hedging through H1 2025, absorbing $5 billion in monthly dollar demand and impacting South Korea’s currency and capital flows.
South Korea’s dollar-won exchange rate in 2026 will be shaped by the National Pension Service’s FX hedging, WGBI bond inclusion, and US Fed policy, with expectations for a stronger won as capital inflows and monetary easing drive the rate lower.
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